China’s role in the multilateral development bank (MDB) architecture is an often overlooked but revealing facet of the country’s growing importance in development finance and global governance. As China shifts from a borrower to a creditor, MDBs represent a valuable tool to further its geopolitical agenda, promote its own distinct views on development and contribute to addressing global economic and social challenges.

To increase its voice and influence, China has employed pragmatic and evolving strategies, including: creating co-financing funds in large MDBs; building a diverse portfolio of relationships with smaller MDBs around the world; and establishing two new MDBs.

Unable to increase its capital shareholding in the World Bank and major regional MDBs due to institutional and geopolitical constraints, China has instead created a series of multibillion-dollar co-financing funds. Though these funds represent a second-best option for increasing the financial capacity of MDBs, this innovative strategy enables China to utilise some of its significant foreign exchange reserves in a way that is not only politically useful in gaining governance influence at the margins, but is also financially secure.

Beyond the MDBs of the ‘Global North’, China has a membership portfolio in several smaller, borrower-owned MDBs in Africa and the Americas, broader than any other Organisation for Economic Co-operation and Development (OECD) donor or major power. Membership in these banks, as well as official lines of credit to other MDBs in eastern Europe and western Asia, support China’s diplomatic and commercial engagement in these regions. While its financial contributions are relatively small, these MDBs serve as useful platforms for China to strengthen its outreach and burnish its credentials as a ‘southern’ donor supporting other developing countries.

China’s greater confidence on the global stage has culminated in the creation of two new MDBs: the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB).

Both have a strong focus on infrastructure and streamlined operational structure, but they also have important differences. AIIB is similar in many ways to the existing Bretton Woods institutions, with nearly 100 country members including five of the G7 nations, but with China clearly in a leadership position. NDB represents instead an institutionalisation of South–South cooperation, with China on equal footing (formally at least) with other BRICS country shareholders.

Taken together, these three strategies show China building its credibility as a responsible and cooperative power within the existing ‘Bretton Woods’-era MDBs, while also supporting the creation and growth of MDBs that better reflect its own views and interests on development. As a shareholder, China has contrasted itself to the United States by avoiding open confrontation and categorical demands, even in MDBs where it has substantial governance power. It has emphasised the leading role of the public sector in development and has pushed MDBs to ramp up their investments in physical infrastructure and reduce their role in imposing policy reforms.

China has consistently sought to increase MDB financial strength and reduce bureaucracy in project approval and oversight.